How Much Is The Internet to Blame For High Street Retailers Going Under?

The last few months have seen further high profile UK businesses announcing that they have entered administration. Comet, Jessops, HMV and Blockbuster have been the most recent of a line of high street retailers going under.The company directors themselves, news channels, press and media were quick to blame a variety of factors, including the growth of Internet shopping.

Whilst there was an increase in overall retail sales in December 2012, of 1.5% compared to the previous year, the British Retail Consortium said that this was due to online shopping bolstering the figure by contributing 17.8% growth in non-food eCommerce sales.

High Street vs Internet

The obvious differences between running a high street store and an online store are the additional costs of overheads, property, staffing and logistics. But what about eCommerce sites? They have their fair share of costs: website administration/content, marketing, customer service and postage administration for example.

For many businesses, their website (if they even have one) is seen as a secondary source of custom, when really they should be focusing more attention on it. It should be considered the primary source of custom, as more people are potentially able to shop online than visit any single shop. Currently, online retail only accounts for around 10% of all retail sales.

Adapting to Trends

With the consistent growth in online shopping over the past few years, it’s said that some high street retailers have invested too much in retail property and not enough in online. I’d have to agree on this. If retailers have not recently invested in eCommerce, then it could be a little too late. I believe the slow response to adapt in any retail environment can lead to failure. Comet, Jessops, HMV and Blockbuster all had nice eCommerce solutions, but were they good enough or were they behind the times?

Blockbuster is a good example. They were not the first to launch online DVD rental, however they did expand into sales of new products and even opened an online marketplace for customers to sell their DVDs and Games. They even have a ‘Click & Collect’ service, but all this it seems hasn’t been enough to pay the bills. Companies like LoveFilm saw the opportunity for online DVD rental and utilised the low cost of online to succeed and get snapped up by the online retail giant, Amazon. Blockbuster missed a huge opportunity whilst they were the leaders in the DVD rental sector.

So with the diversification into online and good website performance, the failure to be first with new opportunities, plus the overheads of retail properties added up.

Successful Operations

Retailers such as John Lewis saw growth in its stores, as well as online. The biggest increase was of course from online, around 40% in their most recent sales figures. Managing Director of John Lewis, Andy Street explained that their investment into online had paid off last December (2012). In particular, they launched a click and collect service so that customers can pick up their products at their own stores plus Waitrose stores, making it more convenient for customers to get their items. This is a trend happening across other big name brands too; Tesco, ASDA and more recently Argos. But the biggest thing that stood out for me was the use of the word ‘convenience’.

Convenience

Convenience is a big deciding factor for online retail. It’s easy to go to an online shop, it’s now even easier to get your goods quickly via click and collect, but convenience also means making it easy to convert website visitors to customers.

Spending every minute of the day testing and refining their website led Amazon to the top position for online retail. Every retailer should be doing this. Conversion Rate Optimisation is the term used to test these factors. It includes analysing and changing shopping cart to purchase funnels, as well as changing elements on the website pages in order to increase the chances of products being selected and purchased.

Diversification

The other big factor in online retail is diversification. Laura recently talked about Diversification in an online sense. High street retailers are well practiced with the tricks and techniques to get people into their stores but what about online? They need to invest in social; Facebook, Twitter, Google+, YouTube and Pinterest are some of the social sites that get huge traffic numbers, so getting a fraction of these visitors to come to their website is vital to online growth and success. If traditional retail brands don’t invest and innovate in social, then someone else will have the advantage.

Where Are We Heading?

Click and collect could be the future, it’s certainly helped the likes of John Lewis and Argos enormously in recent months. It saves on any potential delivery issues and gives a new purpose to the high street premises. This also attracts many shoppers wary of buying goods electronically, as they will have a store to return items to if they aren’t as expected.

Automated warehouse picking machines is one form of technology that is being invested in recently and could revolutionise the eCommerce sector. It primarily means less staffing costs and increased productivity. But this is also likely to cause higher unemployment which can affect sales as a result of the cycle.

Analysts are predicting the continued failure of high street brands in the near future. However, I believe they can survive, although they need to be lean and adaptive, constantly on the lookout for new trends. The consumer world moves so quick in this day in age, which is due to the expansion in technology and increased social communication. This means that the Internet plays a huge part in the future of retail, whether brands operate online or primarily on the high street.

It’s not all doom and gloom for the high street, some brands such as Primark saw sales jump by a quarter in the last three months of 2012. During that period they opened 14 new stores worldwide. What’s surprising is that Primark don’t have an eCommerce solution. I guess they have got their branding and product appeal just right for the high street.

How do you see the future of the high street and how much of a part has the Internet been in the demise of big brand names? Let me know your thoughts in the comments section below.

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5 Comments

Scott12th March 2013

I think when we’ve seen the likes of Blockbuster, HMV, Clarks, Comet et al go bust, we’ve also seen a crime.

We hear so often about big organisations working purely for profit margins. I know of a company in which a family member works, and this company is BIG on margins. They actually work out how many man-hours they’ll pay for in a week by what the margins were last week. They also spend so much time and effort working to these margins that they don’t want to spend their valuable resources keeping up with modern times.

They just didn’t compete online. Did they have the resources to compete? Debatable. Comet for example made net profits of £11.9m in 2010 and made a profit of over £30m bar 1 year when they made a measly £10.1m in the 2009/2010 year.

I think any company that have made profits and not reinvested are committing a crime.

Not so long ago, people were complaining about supermarkets and retail outlets, because they took people away from the high street. Now, people are blaming the net because it is taking people away from those same retail outlets.

Behind both of these moves? Consumer demand. And that’s the driving force for business collapsing, not new advents.

People didn’t want to trudge around a high street in the freezing cold, going from shop A at one end to shop B on the other. So, we (us, government, corps – with admittedly varying degrees of influence) built indoor outlets, so people could find everything quickly, stay warm and dry while doing so and also grab a bite to eat while they’re there, with their cars safely parked away.

Now we have e-commerce that has come on leaps and bounds and solves even more problems for people. I’ll use an example – myself. I work in Central London, with my working hours starting at 8 and roughly finishing at 6, with about 45 minutes each way for travel. I don’t want to trudge off to Westfield or Oxford Street after work. Do I want to do it on a Saturday? Do I bollocks! Have you seen those places on the weekend? Plus, it’s my only time to relax and there’s plenty of rugby to be watched!

But I need to shop. My trousers are literally falling to bits. So I’m going to do it online. I can check out video content of some chap wearing the troosers to see if they’re the right style (I’m not a fussy man, ladies). I can order to my size, get it delivered to where I want, on the day I want, even at the time I want now, I can get a cheaper price online, further online discounts and loyalty schemes, I can be informed if there’s a sale on the go.

Now, here’s the kicker: E-commerce offers so much – would I get the same level of customer service on the high street? In most cases, no. I wouldn’t. I actually feel better looked after when I shop online, for most cases.

Of course, there are exceptions. I love going to butchers and getting better quality meat from locally sourced farms. I pay quite a lot more, but I want to help the process for those business. The fact remains, however, that for the most part I feel better looked after and served as a consumer online then I do offline. It’s much more convenient, it’s cheaper and I’m kept in the loop.

There are a number of examples of companies that made the shift from high street to online and made it a big success for them (for the US Inbounders, Walmart is arguably one of them). But I don’t believe other companies or “market commentators” (give me a break) have the right to blame the internet and ecommerce for the death of the high-street, as that is where consumer demand is going. And it’s going there because of the innovation and improvement of customer service. The blame doesn’t lie with the consumer, either. Unfortunately, most of the blame for the collapse of a high street store is down to poor management – of which, failure to embrace e-commerce effectively is probably chief among the mistakes made.

Hi Tom, Thanks for the comments. I agree with you. I know there are a few people (such as my girlfriend) that still don’t trust online shopping to deliver the right product, undamaged and well packaged.

Although there has been a lot of useful changes to the online experience, I do think there can be further innovation. Hopefully this innovation will result in keeping the the ‘local butchers’ in business by offering them a visible presence in local search.

What do you think?

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